Lexmark harm requirement reopens gap between registered and unregistered TM infringement

UHS of Delaware, Inc. v. United Health Services, Inc., 2016 WL 7474801, No. 12-CV-485 (M.D. Pa. Dec. 29, 2016)

If other courts follow this logic, this could be big.  Plaintiff UHS Delaware sued United Health Services, Inc., and related defendants for trademark infringement under §32 and unfair competition under §43(a), and related state claims.  The parties cross-moved for summary judgment, and the court denied most of the motions, with a significant exception.  And there’s a bit about how (not) to admit evidence of consumer confusion through hearsay exceptions.

UHS Delaware is the healthcare management company for Universal Health Services, Inc., a for-profit company whose subsidiaries run more than 235 acute care and behavior health facilities and surgery centers in a number of states, though not New York. UHS Delaware doesn’t itself provide healthcare services, but rather manages an affiliated network of healthcare service providers. UHS Delaware owns incontestable federal registrations for two trademarks: a UHS word mark and a UHS stylized mark, for use in connection with hospital services and hospital management services.

 

UHS Delaware stylized mark

United Health Services is eight nonprofit corporations which together comprise an integrated healthcare system headquartered in the southern tier of New York.  Defendants began using “UHS” around 1982.  In 1997, it adopted a new system-wide brand:

In 2010, it rebranded again with a new logo, and adopted a policy that, for all its entities, “UHS” would be followed by a specific location or services identifier, such as “UHS Delaware Valley Hospital.” UHS Delaware sued in 2012.

 

New United Health Services logo

“Claims for trademark infringement and unfair competition share the same essential elements under both the Lanham Act and Pennsylvania law.” Except: Lexmark applies to all §43(a)(1) claims, given the clear language of the opinion and the statute.  To maintain a cause of action under § 1125(a), “a plaintiff must plead (and ultimately prove) an injury to a commercial interest in sales or business reputation proximately caused by the defendant’s misrepresentations.”

UHS Delaware submitted no evidence of injury to sales or reputation.  It withdrew its claim for actual damages, and argued that damage to its business and goodwill wouldn’t be calculable without undue burden and expense.  “This deficit of proof necessarily precludes any assessment of proximate cause.”  Thus, defendants won summary judgment on the §43(a) false association claim and state common law unfair competition claims.

This conclusion, while it could shake up quite a lot of §43(a) cases, wasn’t as important here because of UHS Delaware’s federal registration.  Turning to §32: Likely confusion is fact-intensive, and the court found this case was not one-sided enough to justify summary judgment for UHS Delaware.  The marks were highly similar.  The Third Circuit has said that when “products are directly competing, and the marks are clearly very similar, a district judge should feel free to consider only the similarity of the marks themselves.” However, there were genuine disputes about the overlap, if any, between plaintiff’s and defendants’ respective target markets, so the court didn’t stop there.

UHS Delaware maintained that its mark was inherently distinctive (though not because of incontestability, which doesn’t bear on strength); defendants didn’t disagree, presumably because of their own interests, because an initialism like UHS is really just as descriptive as the words for which they stand.  However, defendants argued “that any conceptual strength the marks may have in isolation is diluted by widespread third-party use of the ‘UHS’ logo in both medical services markets and beyond,” and the court found they’d submitted a fair amount of evidence to that effect. Similarly, there wasn’t strong evidence of commercial strength, and general ad expenses don’t equate to promotion directed specifically at the UHS marks. Nor did any consumer surveys or focus groups establish actual market recognition.  Without such evidence, “[t]he dilutive effect of third-party usage clearly undermines the marks’ overall strength. Consequently, this factor is neutral.”

Though the consumers included ordinary patients, the sophistication of that group could still be expected to use “a heightened standard of care” in selecting medical services, favoring defendants.

Length of use/actual confusion: isolated and idiosyncratic examples of confusion don’t count.  The court discounted a pre-rebranding email in which one of defendant’s employees observed to a colleague that “there are a few UHSs out there” and “we sometimes get e-mails and inquiries meant for them.”

Other evidence was: a CNBC broadcast in November 2010 in which defendants’ logo was displayed on screen while plaintiff’s chief executive officer was speaking about Universal; testimony of three of defendants’ officers that both UHS Delaware and United Health Services employees received telephone calls and other communications meant for the other; testimony about a subordinate’s 2013 report to her that a news report had run in Binghamton, New York, referring to a United Health Services facility as a Universal facility in both online and on-air stories; a 2015 tweet including United Health Services’ Twitter handle when referencing Universal; testimony of a Universal employee about a misdirected 2015 email received from Healthgrades about a potential award to defendants’ Wilson hospital; and a 2016 billing dispute letter addressed to “United Health Services” but mailed to both United Health Services and to Universal.

Defendants argued that this evidence was both inadmissible and irrelevant. Kos Pharmaceuticals, Inc. v. Andrx Corp., 369 F.3d 700 (3d Cir. 2000), held that the first level of hearsay—employees recounting customer statements evincing confusion—aren’t excludable hearsay because they aren’t submitted for their truth, but rather for their error.  “It is the second level of hearsay—statements by employees to the deponent describing telephone calls—that must satisfy an exception to the hearsay rule.”  UHS Delaware failed to identify an exception justifying the admission of this second-level hearsay. “Officers may permissibly testify to the fact that they received reports of confusion from their employees, but the hearsay rule prohibits any substantive recount of underlying conversations.”  Anyway, the excluded evidence wouldn’t change the summary judgment ruling, because none of the conversations seemed to establish actual confusion based on the marks, and “[a]necdotal evidence of misdirected telephone calls or letters is usually insufficient to prove actual confusion, particularly when the communications are relayed by interested employees and do not concern the purchase of products or services.” 

The court also pointed out, as to the CNBC interview associating defendants’ logo with Universal’s CEO, “that error may just as likely have derived from the incredible irony that both companies’ CEOs shared the name ‘Alan Miller.’” The other instances of alleged confusion were “few and far between,” “negligible” compared to more than six years’ use of similar marks.

Defendant’s intent: this requires intent to confuse, not just intent to copy.  “[M]ere knowledge” of a competing mark is insufficient to prove intent to confuse.  All UHS Delaware showed was “a potential awareness of Universal’s presence in the general healthcare marketplace,” and defendants’ stated objective was, at least in part, “to distinguish itself from competitors such as United Healthcare and Universal Health System.”

The existence and degree of overlap among the parties’ trade channels and target markets: the parties both advertised hospital and healthcare services through print, online, and television media.  But there was a factual dispute about things like how much UHS Delaware advertising NY consumers would be exposed to; UHS Delaware runs ads in national publications, including the NYT and the WSJ, but doesn’t target New Yorkers.  Some New Yorkers receive services from Universal entities, but not many—only 1% of clients were New Yorkers, except for one facility with a 4% New Yorker population.  “The court cannot ascertain from the record whether the cited examples of overlap derive from UHS Delaware’s marketing efforts and consumer brand recognition, or the sheer happenstance of New York residents requiring hospital services on vacation.”

Relationship of the goods in the minds of consumers: the services are very similar, favoring UHS Delaware.

Likely expansion: This isn’t actually a great shorthand, because it’s supposed to encompass “other facts” “from which a consumer might expect that the trademark owner, through expansion or otherwise, is affiliated with the alleged infringer.” This was neutral, because there was no evidence about consumers’ expectations about expansion; the fact that New York law bars for-profit corporations like UHS Delaware and Universal from operating healthcare facilities in the state wouldn’t necessarily be known to consumers.

The court also denied United Health Services’ motion for summary judgment on its §33(b) senior user defense, given questions about whether its rebranding in 1997 constituted an abandonment of “UHS.”  Most of the uses after that seemed residual, which isn’t enough to avoid an abandonment finding.  Third-party uses of an abandoned mark in news reports wouldn’t be enough, either.